Bukidnon State University

Malaybalay City
College of Business

LEE RUBBER COMPANY

A Written Analysis of a Case

Submitted to

DR. LUZ B. UN

In Partial Fulfillment
of the Requirements for the Course
BUSINESS POLICY
(Business 104)

by

MYRJUL P. EMETERIO
RIZA JANE M. OKIT
EDRIAN D. BARBER
FELBERT CEBALLOS III
Background of the Company

Lee Rubber Company is one of the largest corporations in the rubber industry engaged in
rubber processing and trading, known to be an excellent example of ASEAN transnational
corporation and aims to be the top rubber manufacturer in Asia. It was first incorporated in the
Straits Settlement on December 9, 1931 under the Ordinance No. 155. The company is involved
in rubber processing and trading. Three directors were appointed to the board, namely, Messrs,
Lee Kong Chian, Yap Twee, Leng Seng Chong. The largest shareholder is Mr. Lee Kong Chian.
In 1940, the operation stopped because the factories were seized by Japanese. In September
1945, the business resumed. Since its incorporation, the Company has expanded its nominal
capital by more than one hundred times while issued capital increased almost eighty-one times.

Another dimension of growth reflected in the establishment of subsidiaries. Presently,

there are eight subsidiaries, half of them incorporated in Malaysia. Seven of the subsidiaries were
established between 1947 and 1951, namely Lee Latex, Tropical Produce, Lee Plantations, Kota
Trading, Lian Hin Rubber, United Gee Sendd and Kallang Rubber. Undoubtedly, the Lee Rubber
Company and its subsidiaries form one of the largest corporations in the rubber industry. In the
area of rubber processing, the Group is probably the biggest corporation owning 32 factories
which are distributed over all the states of Peninsular Malaysia except Perlis and Trengganu.

I. Facts of the Case

1. Lee Rubber Company (Pte) Ltd. is one of the few large rubber companies
incorporated in Asia.
2. Lee Rubber Company started its operations in 1928. Its activities were stated in the
Articles of Incorporation as rubber planters and manufacturers, brokers, agents,
merchants, importers, exporters, and dealers in rubber and rubber goods and related
goods.
3. In 1932, the largest shareholder was Mr. Lee Kong Chian with 3,123 shares which
represented 62% of the 5,000 shares taken up.
 4. The nominal capital was further increase in 1953 to $10.1m and in 1957, the nominal
capital doubled.
5. -Since its incorporation, the Company has expanded its nominal capital by more than
one hundred times while issued capital has increased almost by eighty-one times.
6. Subsidiaries have been established namely: Lee Latex, Tropical Produce, Lee
Plantations, Kota Trading, Lian Hin Rubber, United Gee Seng and Kallang Rubber
which was established between 1947 and 1951. Lee Rubber (Selangor) was
incorporated in 1962 in Malaysia.
7. Lee Plantations is primarily an estate management company.
8. All subsidiaries except for Lee Plantations are engaged in rubber processing
activities.

II. Statement of the Problem

1. How will the Lee Rubber Company maintain the availability of the raw rubber supply
for their production particularly in Malaysia despite of the restricted supply of rubber in
the open market?
2. How will Lee Rubber increased competition for raw rubber produced by small holders?

III. Objectives
 To protect the interest of workers and increased the employment potentiality while
maintaining a good relationship with the rubber suppliers.
 To provide excellent customer service.
 To safeguard the future of the company and as well as maximize its profit.

IV. Areas of Consideration

Strengths
 Largest corporation in the rubber industry
 Having a data processing department that controls the daily operation of
subsidiaries.
  Low labor turnover rates
 Close contact of rubber companies located at Singapore and Malaysia.
 Competition among subsidiaries is greatly encouraged for higher productivity.
Weaknesses
 Total decentralization of authority and operation between subsidiaries.
 Minimal communication between laboratories of different subsidiaries.
 Lee rubber's subsidiaries in Malaysia are wholly dependent on Malaysia small
holdings for their raw materials.
Opportunities
 New processing techniques for converting conventional rubber to specified
standards.
 Higher supply of rubber in neighboring countries like Indonesia.
Threats
 Synthetic rubbers being present to the market.
 New entrants to the rubber industry.
 Great fluctuations of rubber prices.

V. Alternative courses of Action

1. The subsidiaries of the Lee Rubber Company specifically in Malaysia must invest
in plantation to ensure an adequate supply of raw materials.
Advantages Disadvantages
- The company will surely have an - Plantations require heavy
adequate supply of raw expenditures and practical
materials. experience.
- It would reduce the dependence - It would require greater time and
of Lee Rubber Company to its effort to establish a plantation.
suppliers. - Greater costs will surely be incurred
- There can be a potential supplier by the company in establishing a
of other companies that needs plantation.
rubber as their raw materials
and that would maximize the
profit of the company.
 2. The subsidiaries of Lee Rubber Company in Malaysia must engage in importation
of rubber from neighboring countries like Thailand and Indonesia to sustain the
supply of rubber for their problem.

Advantages
- The company would not struggle -
in finding a supply of rubber in
Malaysia.
- The company can choose the -
suppliers who offer the cheapest
rate without sacrificing the
quality of rubber.
- Trade development agreements -
from foreign countries is possible,
this will allow Lee Rubber to
access the unique benefits from
other countries
Disadvantages
There's no assurance that the
suppliers outside the country would
prioritize the Lee Rubber Company.
It would be difficult to find a
foreign supplier because some may
already be engaged in other trade
agreements.
The company would incur
additional expenses like tariff taxes
and shipment fees.

3. The company must look for a potential substitute to natural rubber like synthetic
rubber.
Advantages Disadvantages
- Synthetic is a good alternative for - There's no assurance to the quality
natural rubber and it is cheaper. of output.
- Synthetic rubber has better - The customers of the company may
resistance to oil and certain be disappointed with the output and
chemicals. may not be able to adjust to the
- Synthetic rubber last longer changes of the product.
compared to natural rubber. - The dynamic performance of
synthetic rubber cannot be assured.

VI. Recommendation

The best alternative course of action is number two which is to engage in

importation of rubber from neighboring countries like Thailand and Indonesia in
order to sustain the supply of rubber for Lee Rubber's production from other countries
to meet the needs of their production. In this way, the company will have lots of
 suppliers of which it can choose the one that offers the cheapest rate for a quality raw
rubber. It will still have its supplier inside Malaysia. It will also get a benefit of
building connections and developing trade agreements. There will be disadvantages
but the advantages are way more than that.

VII. Conclusion

In conclusion, product importation has a lot of benefits. As a manager and as a

decision maker you must also put into consideration matters that involve the supply
of raw materials which is a very important factor in manufacturing of products. In this
case, we've learned that the company must have a proper implementation of policies.
Business policies must have the characteristics like being well-planned and realistic.
In addition, attaining success in business is establishing network of connections.
Through these connections your business will surely encounter fewer problems and if
problems are encountered, there are always these connections that would help you.